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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From _________ to ________

Commission file number 0-26482

TRIKON TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware 95-4054321
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
Ringland Way, Newport, Gwent NP18 2TA,
United Kingdom		  
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code 44-1633-414-000

Not Applicable
Former name, former address and former fiscal year, if changed since last report

Indicate by check whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes        No 

As of November 8, 2002, the total number of outstanding shares of the Registrant’s common stock was   14,023,976.



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Trikon Technologies, Inc.

INDEX

      PAGE
NUMBER		  
 
     
 
PART I.  FINANCIAL INFORMATION      
         
Item 1. Condensed Consolidated Financial Statements (Unaudited):      
         
  Condensed Consolidated Balance Sheets at September 30, 2002 and December  31, 2001   3  
         
  Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2002 and September 30, 2001   4  
         
  Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2002 and September 30, 2001   5  
         
  Notes to Condensed Consolidated Financial Statements   6  
         
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   9  
         
Item 3. Quantitative and Qualitative Disclosure about Market Risk   20  
         
Item 4. Controls and Procedures   20  
         
PART II. OTHER INFORMATION      
         
Item 1. Legal Proceedings   21  
         
Item 2. Changes in Securities and Use of Proceeds   21  
         
Item 3. Defaults Under Senior Securities   21  
         
Item 4. Submission of Matters to a Vote of Security Holders   21  
         
Item 5. Other Information   21  
         
Item 6. Exhibits and Reports on Form 8-K   21  
         
SIGNATURE PAGE   22  

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Trikon Technologies, Inc.

PART 1  FINANCIAL INFORMATION
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)

    September 30,
2002		   December  31,
2001		  
   
 
 
    (Unaudited)   (NOTE A)  
Assets          
Current assets:          
Cash and cash equivalents
   $ 43,911   $ 44,667  
Accounts receivable, net
     7,012     19,775  
Inventories, net
     23,629     21,624  
Other current assets
     4,040     3,084  
     
   
 
Total current assets
     78,592     89,150  
               
               
Property, equipment and leasehold improvements, net of accumulated depreciation and amortization
     20,126     20,425  
Demonstration systems, net of accumulated depreciation
     4,182     2,962  
Other assets
     212     196  
   
 
 
Total assets
   $ 103,112   $ 112,733  
   
 
 
               
Liabilities and shareholders’ equity
              
Current liabilities:
              
Accounts payable and accrued expenses
   $ 7,516   $ 6,997  
Current portion of long-term debt
     8,384     9,636  
Deferred revenue
     1,434     5,106  
Other current liabilities
     4,051     5,032  
   
 
 
Total current liabilities
     21,385     26,771  
               
Long-term debt less current portion
     12,456     15,606  
Pension obligations
     1,612     3,372  
Other non-current liabilities
     1,219     1,531  
   
 
 
      36,672     47,280  
               
Shareholders’ equity:
              
Preferred Stock:
              
Authorized shares — 20,000,000		     —     —  
Issued and outstanding — Nil at September  30, 2002 and December 31, 2001
              
Common Stock, no par value:
     254,533     242,725  
Authorized shares — 50,000,000
              
Issued and outstanding — 14,023,338 at September  30, 2002 and 12,855,279 at December 31, 2001
              
Accumulated other comprehensive loss
     (6,199 )   (9,774 )
Deferred compensation
     (948 )   (2,086 )
Accumulated deficit
     (180,946 )   (165,412 )
   
 
 
Total shareholders’ equity
     66,440     65,453  
   
 
 
Total liabilities and shareholders’ equity
   $ 103,112   $ 112,733  
   
 
 

See Notes to Unaudited Condensed Consolidated Financial Statements.

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Trikon Technologies, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except for per share data)

    Three Months ended     Nine Months ended  
   
   
 
    September  30, 2002     September 30, 2001     September 30, 2002     September 30, 2001  
   
   
   
   
 
Revenues:                                
Product revenues
   $ 4,506     $ 19,738     $ 20,968     $ 85,039  
License revenues
     —       —       50       —  
   
   
   
   
 
    4,506       19,738       21,018       85,039  
Costs and expenses:
                                
Cost of goods sold
     4,407       10,306       15,645       43,346  
Research and development
     3,239       2,530       8,060       7,377  
Selling, general and administrative
     4,612       5,702       15,105       19,055  
   
   
   
   
 
    12,258       18,538       38,810       69,778  
                               
(Loss) income from operations
     (7,752 )     1,200       (17,792 )     15,261  
Interest income (expense), net
     42       (38 )     60       (144 )
   
   
   
   
 
(Loss) income before income tax (credit) charge
     (7,710 )     1,162       (17,732 )     15,117  
Income tax (credit) charge
     (637 )     268       (2,200 )     3,618  
   
   
   
   
 
Net (loss) income
     (7,073 )     894       (15,532 )   $ 11,499  
Preferred dividend
     —       —       —       141  
   
   
   
   
 
Net (loss) income applicable to common shares
   $ (7,073 )   $ 894     $ (15,532 )   $ 11,358  
   
   
   
   
 
                               
(Loss) earnings per share data:
                                
Basic:
   $ (0.55 )   $ 0.08     $ (1.25 )   $ 1.02  
Diluted:
   $ (0.55 )   $ 0.07     $ (1.25 )   $ 0.91  
                                 
Weighted average common shares used in the calculation:
                                
Basic:
     12,874       11,669       12,419       11,146  
Diluted:
     12,874       13,077       12,419       12,531  

See Notes to Unaudited Condensed Consolidated Financial Statements.

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Trikon Technologies, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)

    Nine Months ended  
   
 
    September 30,     September 30,  
    2002     2001  
   
   
 
Operating activities
                
Net (loss) income
   $ (15,532 )   $ 11,499  
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
                
Depreciation and amortization of property plant and equipment
     3,844       2,635  
Amortization of deferred compensation
     1,138       1,138  
Amortization of financing costs
     —       27  
(Gain) loss on disposal of property plant and equipment
     (8 )     23  
Provision for loss on accounts receivable
     (147 )     (30 )
Changes in operating assets and liabilities:
                
Accounts receivable
     12,910       138  
Inventories (including demonstration systems)
     (3,225 )     4,649  
Other current assets
     (956 )     2,284  
Accounts payable and other liabilities
     521       (10,095 )
Income tax payable
     (1,585 )     2,724  
Pension obligations
     (1,760 )     —  
Deferred revenue
     (3,672 )     (1,272 )
   
   
 
Net cash (used in) provided by operating activities
     (8,472 )     13,720  
Investing Activities
                
Purchases of property, equipment and leasehold improvements
     (1,907 )     (4,973 )
Proceeds from sale of property, equipment and leasehold improvements.
     60       0  
Other assets and liabilities
     275       (104 )
   
   
 
Net cash used in investing activities
     (1,572 )     (5,077 )
Financing Activities
                
Issuance of common stock
     11,808       10,003  
Preferred stock dividend
     —       (50 )
Redemption of preferred stock
     —       (2,691 )
Redemption of 71/8% convertible debt
     —       (1,505 )
Borrowings under bank credit lines
     —       21,450  
Repayments under bank credit lines
     (5,817 )     (2,675 )
Payments on capital lease obligations
     (449 )     (168 )
   
   
 
Net cash provided by financing activities
     5,542       24,364  
                 
Effect of exchange rate changes in cash
     3,746       1,837  
                 
Net increase (decrease) in cash and cash equivalents
     (756 )     34,844  
Cash and cash equivalents at beginning of period
     44,667       7,076  
   
   
 
Cash and cash equivalents at end of period
   $ 43,911     $ 41,920  
   
   
 

See Notes to Unaudited Condensed Consolidated Financial Statements.

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Trikon Technologies, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2002

NOTE A   BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of Trikon Technologies, Inc. (the “Company”) and its subsidiaries. All material intercompany balances and transactions have been eliminated. The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The operating results for the three and nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002.

The balance sheet at December 31, 2001 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

NOTE B   RECENT ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations” addresses the accounting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement is effective for financial years commencing after June 15, 2002 and the adoption of this statement is not expected to have a material effect on the Company’s financial position or results of operations.

SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” supersedes SFAS 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and provides a single accounting model for the disposal of long-lived assets from continuing and discontinued operations. The Company adopted this standard on January 1, 2002 and the adoption of this statement did not have a material effect on the Company’s financial position or results of operations.

In June 2002, the Financial Accounting Standards Board issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The statement changes the measurement and timing of recognition for exit costs, including restructuring charges, and is effective for any such activities initiated after December 31, 2002. It has no effect on charges recorded for exit activities begun prior to this date. The adoption of this statement is not anticipated to have a material effect on the Company’s financial position or results of operations.

NOTE C   INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or market value. The components of inventory consist of the following:

    September 30,     December 31,  
    2002     2001  
   
   
 
    $’000     $’000  
Customer service spares
   $ 4,095     $ 3,550  
Components
     10,441       11,442  
Work in process
     8,316       5,507  
Finished goods
     777       1,125  
   
   
 
    $ 23,629     $ 21,624  
   
   
 

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NOTE D   COMPREHENSIVE (LOSS) INCOME

Comprehensive (loss) income is comprised of the following:

    Three Months Ended          Nine Months Ended      
   
   
 
    September 30,      September 30,      September 30,      September 30,  
    2002      2001      2002      2001  
   
     
     
     
 
  $’000    $’000    $’000    $’000  
                                 
Net (loss) income
   $ (7,073 )   $ 894     $ (15,532 )   $ 11,358  
Pension plan obligations
     38       —       38       —  
Foreign currency translation adjustments
     981       2,676       3,537       (546 )
   
   
   
   
 
Comprehensive (loss) income
   $ (6,054 )   $ 3,570     $ (11,957 )   $ 10,812  
   
   
   
   
 

NOTE E   EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

    Three Months Ended     Nine Months Ended  
   
   
 
    September 30,